M&M 3-2-3 Strategy

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” ©brahm&company

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BASE RESEARCH Automotive Industry Analysis Global India Specific Steps towards “Design to Delivery” target “Business to be materialized” - VISION Organic & Inorganic routes to growth i. Cater to the needs of Truck market Industry ii. Non ferrous alloys industry iii. Integrating Aftermarket & Systech Integration “Challenges Ahead” India Meet the “Just-In time” requirements of Global Automotive components MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM THREE WORDS FOR THE 3-2-3 TARGET “FOUR STROKE” ©brahm&company

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AUTOMOTIVE INDUSTRY ANALYSIS MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Stagnant sales except in Asia Over capacity in most regions Intense product & price competition Industry margins under pressure Most of the Industry EVA negative Global focus on Asia *Precision Engineering Auto Components Industry growing at a faster pace PRODUCT RANGE IN AUTO COMPONENT INDUSTRY “FOUR STROKE” ©brahm&company

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RANGE OF AUTOMOTIVE PRODUCTS POWERTRAIN MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” Engine Parts Chassis & body Parts Suspension & Braking Parts ©brahm&company

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AUTO COMPONENTS PRODUCTION STATUS IN INDIA MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Indian auto component industry growing in all sectors Consistent CAGR of 17% observed YOY as projected by McKinsey Exports of finished automobiles & auto-components increasing at the CAGR of 25+% Automobile & automotive component industry provides an increased output of 15 to 17% to the total Industrial Output. **Half a million Indian Commercial Vehicles is 5th largest in the world ***INFRASTRUCTURAL DEVELOPMENT PLANNED 46000km of road development – US $27bn project in progress – to be completed by Dec-2012 Port Infrastructure Up gradation Projects – US $16 Bn. In progress *2008 estimate as in ACMA ** Source: CRIS INFAC ***NHAI / CRIS / EIA / Department of Shipping “FOUR STROKE” ©brahm&company

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AUTOMOTIVE COMPONENTS INDUSTRY ANALYSIS MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM KEY MARKET DRIVERS Linked to the growth of OEM industry Highly sensitive to input cost escalation Competitiveness driven by Manpower – Large pool of qualified engineers & skilled technicians at lower cost Lower investment cost – Through appropriate, low cost automation KEY TRENDS - India’s emergence as low cost global sourcing destination. - Indian ancillary manufacturers are shifting focus from global after-market to global OEM supplies. - Firms focus on operational excellence to improve quality & reliability of products.(8 Deming Award winners) - Increasing relevance of Global Tier 1 suppliers (Bosch, Denso, Visteon, Delphi) “FOUR STROKE” KEY MARKET ANALYSIS ©brahm&company

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AFTER MARKET TO TIER – I STATUS – COMPLEXITY MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Aftermarket Tier 2-n supplier Tier 1 supplier Low Medium High Transition Path Customer Complexity Product Complexity “FOUR STROKE” OPPORTUNITES WIDEOPEN ©brahm&company

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APPROACHES – “DESIGN TO DELIVERY” MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Exports from India Castings Forgings Machined Items Rubber Items Wheel Rims - Greenfield Overseas Location - Overseas Acquisition ORGANIC GROWTH STRATEGY INORGANIC GROWTH STRATEGIES “FOUR STROKE” Major Segments to concentrate for supplies to Trucks& Buses worldwide ©brahm&company

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COMMERCIAL VEHICLE BUSINESS APPOACH MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Indian Commercial Vehicle Industry – Broad Scope - Half million Indian CV market is the fifth largest in the world “FOUR STROKE” CATER TO THE GROWING DEMAND OF TRUCKS ©brahm&company

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EVOLUTION OF TRUCKS & BUS MARKET WITH CHANGING ECONOMIES MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Indian Bus market shows a high growth rate in the early phases of development driven by Intercity Passenger Market *AT Kearney Database “FOUR STROKE” Growth in the GDP would fuel the demand for Trucks in India & Asian Countries Growth in GDP would fuel the demand for Trucks ©brahm&company

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BUSINESS TO MATERIALISE MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” Need for quality products with advanced features is the need of the hour Ability to deliver such products of world class should be encouraged. Any business started would need to be materialized justifying the investment made on its infrastructural developments. Would lead to quicker ROI on the CAPEX(Capital Expenditure) made. BUILDING THE EXPERTISE TO MEET GLOBAL DEMAND ©brahm&company

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VOLUME CONSTRAINTS – IN TRUCKS & BUSES MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM EXPORTS It is a wiser option to choose truck market in exports over car segment due to the following reasons, i. Abrupt fluctuations in the volumes can be logistically met. ii. More profit over the components supplied to car as they are heavy duty components iii. Doesn’t undergo frequent design changes. Changes in Truck market can be accommodated easily rather than car market. iv. It is always worthy to manufacture cars in the place where it is sold v. Varied range of automotive components supplied to trucks. Optimal usage of resources. Varied range of products can be supplied ( which includes Ferrous & Non-Ferrous , Composites, Plastics etc.) vi. Installing organically / acquiring inorganically, a Non-ferrous manufacturing base would add value t o its acquisition as non-ferrous alloys replaces the usage of ferrous materials (STRENGTH TO WEIGHT RATIO) vii. Wider Global penetration possible as the scope can be extended to Aerospace Industry too with the usage of Magnesium Alloys. vii. These advantages would provide a competitive advantage over the existing businesses by “Materialising “ them within a short period. “FOUR STROKE” “Business to Materialize” – Steps towards Design to Delivery ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” - Recycling of dismantled spare parts – cost reduction - Tap the opportunities in the vehicle dismantling industry - Dismantling of spare parts INTEGRATION OF AFTERMARKET - SYSTECH Note : Proposed to start a new unit “MAHINDRA RE-ENGINEERING” needs to be set up ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM CHALLENGES Widely Unorganised Other big players can enter into this market OPPORTUNITIES Large scale operation in a vehicle dismantling /reengineering industry THE MOVE Alternate and cheap source of raw materials Greater access to raw materials Absence of organised player in vehicle dismantling industry which can bring in positive implications to the society Sales potential eg. Aluminium components in a vehicle Industry Worth ~ US $ 3million p.a “FOUR STROKE” MARKET ANALYSIS - REENGINEERING ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” MARKET POTENTIAL – ALUMINIUM SCRAP ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” STRATEGIC IMPLEMENTATION PROCESS - Evaluate of the vehicle condition by First Choice - Vehicles in disposal stage will be handed over to the dismantling industry (Mahindra Dismantlers) - Spare parts of the vehicles will be examined will be categorised in the following ways: - Undamaged and re usable spares Produced by Mahindra Not produced by Mahindra - Highly damaged and cannot be re used spares - Spares unavailable in the market - Spares that cannot be used for Systech - Undamaged spares and spares that are of variable degree of quality ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” STRATEGIC IMPLEMENTATION PROCESS ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “FOUR STROKE” CHALLENGES AHEAD - Indian Auto Industry likely to retain Low cost advantage for a sizeable Period. - Attractive collaboration opportunities between Indian CV industry / Auto component manufacturing with global OEMs and the Supply Chain majors - Great opportunity to partner & use India’s competitive advantages for sourcing and setting up collaborative operations. Meet the JIT requirements of global automakers – possible by efficient logistics setup. ©brahm&company

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MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM THANK YOU “FOUR STROKE” ©brahm&company brahm&company Originality! The mark of Genius Copyright @2010 brahm&company. All rights reserved. Dilip Krishnan Founder & CEO